During my recent campaign, I made public employee benefit reform a high priority and, having been reappointed to the Public Service Committee, I’ll be working hard on the issue.
There are seven compelling motivations for seeking public employee benefit reform:
- Rising current costs of benefits (especially health care)
- Deferred costs that will burden future taxpayers (pensions, but especially retiree health care)
- Investment risk that may lead to additional burdens for future taxpayers (mostly pensions)
- Administrative complexity that creates potential for waste and corruption
- Disparity between public and private employees
- Disparities among public employees
- Abuses in the system
There are three fundamental reforms that we need to make in Massachusetts that will go a long way to addressing these concerns:
- Reduce the maximum guaranteed pension benefit, to bring it in line with social security (reduce contributions proportionally).
- Require public retirees, especially those under 65, to contribute more for their health care.
- Give municipal mangers more authority to control plan design.
Elimination of risk and abuse in the pension system requires more complex reforms, but limiting the maximum benefit would help a lot.
Your comments on this issue will be much appreciated. Or you can reach me by phone or email if you prefer. I’m also eager to sit down with groups or individuals who want to have more extended conversation about these issues.
In a meeting I attended with Gov. Patrick during his campaign last Fall, the audience brought up a few points regarding the pension plans in the state. One was to move the eligible retirement age to match the criteria and sliding scale of Social Security. At the time there was discussion to make that a gradual change as newer employees come on board. I think if you are working for less than 10 years, this change should be immediately adopted. For those over 10 years, move the retirement age out X number of years. Further, I don’t want anyone eligible to retire just because they have worked for X number of years. Age should be the primary determinant factor.
As for health insurance, I agree with those already posting to this chain of comments. Contributions from employees should match those of the average private sector employee. Giving municipalities the option to join more cost effective health plans negotiated by other cities, towns and/or the state should be adopted ASAP.
Will – Important points.
Across the country the cost of health care is forcing municipalities to fire teachers, policemen, firemen, and not pave the roads. The most compelling thing that can be done quickly to give local governments in Massachusetts some relief is to make it far easier for these governments to move to the Group Insurance Commission. This means letting the GIC negotiate on the towns’ behalf, and requires accepting the GIC standard benefit design, which is less rich than some of the current local benefit designs.
Your other readers have already pointed out that the real issue is the rapidly escalating cost of health care. This is a problem for all businesses – not just local government. The most recent Patrick Administration bill to push away from fee for service is a good start -and this can be improved (or not) through the legislative process.
Keep up your good work.
Why allow more municipal plan design authority? Why not get the benefits of economies of scale by having all government employees and elected officials receive the exact same benefits package?
I will readily admit up front, though, that my knowledge of this issue is not particularly well informed. I just didn’t see WHY you want more municipal control.
You right on that economies of scale are important. For many municipalities, plan design flexibility would mean joining the state’s Group Insurance Commission. In fact, my view is that municipalities should have plan design flexibility as long as they moving to the GIC or something that looks like the GIC.
See this post for a fuller discussion: http://willbrownsberger.com/index.php/archives/211
Whatever happens, let’s not have this turn into yet another effort to undo collective bargaining. That business has managed to curtail private industry bargaining does not mean it should happen in the public sector. In fact, individuals are not as powerful as either a business or the government.
As to health care benefits, I do feel we should be moving somewhat away from collective bargaining. Collective bargaining just doesn’t work for plan design. See this post: http://willbrownsberger.com/index.php/archives/211
Will, I am troubled by the idea of bringing pensions in line with Social Security because I read this at your link:
”As of January 2006, the maximum monthly federal SSI payment for an individual living in his or her own household and with no other countable income is $603…”
$603 per month? Maximum? $7236 per year?
Did I misunderstand that?
Yes, social security benefits are different from SSI. SSI is supplemental security income for people who don’t get social security. The maximum social security benefit for an individual is just under $30K per yer.
Yes! Health care costs per se are a big part of the problem! And yes, various forms of tax-deferred saving are available to public employees.
Kathleen is absolutely correct that this is a very complicated issue and that would go on to say one plan does not fit all needs. I believe efforts to have a singular choice for all public employees is no longer affordable and that employees should have the option to choose a plan that fit the needs and circumstance. Having the state mandate what benefits are required for all plans is a luxury not all want to pay for. Allowing individual employees to control their retirement and health plans is where I believe the state should be moving, and starting with self directed retirement plans for new employees and not negotiating about health care plans design are good starts.
Just saw this in the Washington Post-copy and paste to your browser.
http://voices.washingtonpost.com/ezra-klein/2011/03/what_you_need_to_know_about_st.html?wprss=ezra-klein
Worth a read regarding assumptions.
The key idea for me is that we are bearing too much risk in the pension system. But there is more to that risk than the housing bubble and it’s impact on the stock market — that is a decade scale phenomenon. We are making multi-decade bets about the health of the equity markets that we have no good foundation for making.
Public Pensions & Benefits are clearly very complex problems which are sinking the ship in this post 2008 economic climate. But this has become the lightening rod in a climate where OTHER IMPORTANT PARTS OF THE SOLUTION have failed. Controlling medical costs seems hopeless & such changes as taxing the wealthy have been negotiated away. Wall street sank the world economy and remains unregulated.
I know it is not true on this website but the prevailing political discussion in the country vilifies Public Sector workers especially teachers. This instead of focusing anger on what the middle class has lost in the private sector.
I’m 64 years old and have been working for the Comm. of Mass for only 12 years. I worked as a contractor for the state at 3 different times for a total of 7 yrs. The rest of the time I worked in private industry. I’m continually amazed at the mis-impressions and lack of knowledge that people have that fuel people’s anger at the public sector.
Here are a few facts from where I work:
1. The Massachusetts Pension System contrary to others in the contrary has had changes over the years. There are 4 tiers of contributions to the Pension System. People hired after 7/1/96 pay 9% of their salary, after 1/1/84 8%, after 1/1/75 7%, before 1/1/75 5%.
2. Employees hired after a certain date (1996??) pay into Medicare which will be their primary health plan.
3. Employees can retire at age 55 but not with 80% of their pay (as many people believe). A pension is age and years of experience. Police, corrections officers, state police, & some direct care workers can add as much as 10 yrs which means that they probably can get 80% at age 55.
4. It is considered “double dipping” to get a state pension and social security. Massachusetts is 1 of 11 states where public employees do not pay into social security. If an employee has paid into social security in the private sector their social security will be seriously reduced. This can also mean that leaving a state job in your 40’s (or starting to work for the state in your 40’s) can have a big financial impact.
5. The state has an excellent Deferred Comp Plan for people to save tax deferred for retirement.
6. We are very short staffed for our workload where I work. Over the years hiring has flip flopped bewteen public vs. private models. Over half of the IT people are contractors — very talented specialists. In the 12 years that I have worked at my agency only 2 state workers have been able to be hired from these contractors because there are no job openings. All the technical people have been hired from India through employment agencies — this is not any kind of slur but an observation.
7. Employees who changed jobs in the state lost their seniority — a risky thing to do.
6. Under Governor Patrick a major consolidation of IT has been happening for the last 3 years. It is on schedule, aggresssive, smart, comprehensive, forward thinking, and financially smart. It also lays the groundwork for career paths in todays IT world.
5. I am 64 yrs old and have worked in IT for 12 years. I pay 9% of my salary into the State Pension, pay into Medicare, and have not had a raise in 5 years (I am a TPL worker — in the early 1980’s the state lost many talented IT people due to low pay — but these days it means that TPL people do not get any union raises and there’s no money to give TPL people raises). We all had 3 furlough days in 2010 so I had a pay decrease (managers has a 2 or 3 week furlough). I hope to retire in 2 yrs with 35% of my modest salary and I feel lucky that I will have a GIC health plan to backup my Medicare. Since I paid into social security for 30 yrs in the private sector it is my understanding that my social security will not be impacted by my pension. I am a penurious person who has saved til it hurts for many years in 401k’s and Def Comp & have lost alot and won some.
In summary:
1. Defend public sector workers and teachers with facts and a vision; lament what the middle class has lost in the public sector
2. Solve problems (e.g. getting local employees onto GIC)
3. Close loopholes (those library board jobs, high paid political appointments in the last 3 yrs before retirement, job elimination perks, …)
4. Fix healthcare — skyrocketing health care costs are the really big problem
5. Champion the invisible solutions in progress like IT Consolidation
Thanks, Maddy, for speaking out.
I think everything you say is true. I am very conscious that many public sector workers are overextended in understaffed job situations.
My emphasis on reforming benefits comes from my belief in the missions that we undertake collectively through government. Unless we address the features of the system that generate a perception of unfairness, we will continue to find that many people are unwilling to support those missions.
Will it’s a great relief to see someone working to address this issue so carefully. Thank you.
Jane